Safaricom announces record profits

Safaricom, the most profitable company in Sub-Saharan Africa, announced on Tuesday a record profit before taxes of 19.9 billion Kenyan shillings (US$326 million) for the financial year ending March 31.

The results sent a strong warning to competitors that Safaricom is ready to compete with rivals. The company is banking on its extensive infrastructure to succeed in Kenya's crowded telecom market.

"We are ready for the competition," said Safaricom CEO Michael Joseph. He added that the entry of mobile phone service providers Econet Wireless and Orange (Telkom Kenya) will have little effect on the company's performance. "Competitors are going to struggle to catch us as they roll out their services. The process has taken us eight years and billions of shillings to cover 80 percent of the population."

The earnings will boost the company's shares, expected to list at the Nairobi Stock Exchange next week. The Kenyan government, which owns 60 percent of the company, is in the process of selling 25 percent of its stake in an initial public offering (IPO). It expects to raise 50 billion Kenyan shillings from the IPO; although it has attracted applications worth 191 billion Kenyan shillings. Potential shareholders will be determined by the weekend, when the company releases results of the IPO.

With 16 percent growth, Safaricom broke its record of 17.2 billion Kenyan shillings, which it set last year. Profit after taxes increased by 15.3 percent, and the company's subscriber base increased from 6.1 million in 2007 to 10.2 million this year, representing a 68 percent growth in market share.

Other factors driving profits include new products and services introduced during the year, general improvement in the economy and increased loyalty from subscribers.

Voice services remained Safaricom's greatest revenue earner at 54.2 billion Kenyan shillings this year, up from 41.5 billion Kenyan shillings in 2007, a 30.6 percent growth. Short message service (SMS) and data contributed 4.6 billion Kenyan shillings compared to 4 billion Kenyan shillings last year. This distribution is set to change with the company's introduction of 3G (third-generation) mobile technology, which permits high-speed data service.

"The 3G technology will enable us offer our subscribers within the current coverage area a wider-range of more advanced data and voice services, while achieving greater network capacity through improved spectral efficiency," said Joseph.

During the year, Safaricom spent over 23 billion Kenyan shillings on network expansion, increasing its number of base stations from 1,200 to 1,558 and upgrading 116 of those stations to 3G. The improvements have pushed the company's total capital expenditure to 88 billion Kenyan shillings since its inception in October 2000.

Safaricom paid 27.4 billion Kenyan shillings during the year to the government as duties, taxes and licenses and another 6.09 billion Kenyan shillings as income tax.